March 30, 2007

World dairy prices continue to strengthen
 

World dairy prices are seen to strengthen but on when it will peak and weaken are unpredictable, according to according to Western Illinois Agriculture Department Chair Prof William Bailey.

The drought in Australia and the slow production from New Zealand will also affect world milk production, he said.

Meanwhile, economists from ASB Bank in New Zealand believe prices will remain near current levels for at least one year and, as a result, have forecast New Zealand dairy co-operative Fonterra's payout next season to reach US$4.60 per kilo of milk solids - about 10 percent above this year's payout.

World dairy prices have been erratic in several months which make price predictions more challenging.

As the world continues to look to US for its dairy supply, the world's biggest milk producer is taking production capacity off-line despite its soaring prices.

The farmer owned Cooperatives Working Together said more dairy farmers than ever have asked to become part of the group's program to be paid to go out of business.

This situation could reduce US dairy output by more than 1 billion pounds.

While this is only about half of 1 percent of US production, it is interesting that the rest of the world thinks about raising production to take advantage of high international dairy products while US dairy farmers are moving the other direction.